Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) Q1 2024 Earnings Call Transcript May 7, 2024

Apellis Pharmaceuticals, Inc. reports earnings inline with expectations. Reported EPS is $-0.54 EPS, expectations were $-0.54. Apellis Pharmaceuticals, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Apellis Pharmaceuticals First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, today's call is being recorded. I will now turn the call over to your speaker host, Meredith Kaya, Senior Vice President, Investor Relations and Strategic Finance. Please go ahead.

Meredith Kaya: Good morning, and thank you for joining us to discuss Apellis' first quarter 2024 financial results. With me on the call are Co-Founder and Chief Executive Officer, Dr. Cedric Francois; Chief Operating Officer, Adam Townsend; Chief Medical Officer, Dr. Caroline Baumal; and Chief Financial Officer, Tim Sullivan. Before we begin, let me point out that we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties and actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional detail. Now, I'll turn the call over to Cedric.

Cedric Francois: Thank you, Meredith, and thank you all for joining us this morning. 2024 is off to a strong start. SYFOVRE continues to deliver robust growth in the first quarter, driven by an acceleration in demand, resulting in $137 million in net sales, up 20% compared to Q4. EMPAVELI is also making a difference for patients with PNH, generating $26 million in revenue for the quarter, and we have a number of exciting opportunities to potentially expand EMPAVELI into new indications. We are one of the rare companies in our industry to have two drugs approved in just three years, a testament to the strength of our science and our incredible team. As a result, Apellis is now well-positioned strategically, operationally, and financially to deliver significant long-term value to our shareholders.

SYFOVRE is key to delivering this long-term value and the growth in Q1 underscores the strong demand we continue to see from both physicians and patients. Through March, eye care professionals administers 250,000 SYFOVRE injections and in the first 12 months of launch, SYFOVRE generated over $400 million in sales, substantially exceeding both our and Wall Street's expectations. This is extraordinary performance for any new product launch. SYFOVRE’s leadership in the market is driven by three important factors. First, treatment with SYFOVRE results in increasing effects over time with up to 42% slowing of GA progression in year three of GALE, building on the meaningful effect demonstrated in DERBY and OAKS. Second, SYFOVRE has a well-documented safety profile based on extensive experience both clinically and in the real world.

And third, SYFOVRE offers flexible dosing as described in our label, which means that patients can benefit from SYFOVRE's impressive clinical profile in as few as six doses per year. As the market leader, we are only getting started. Our performance to date reaffirms our belief that SYFOVRE has the potential to become a multi-billion dollar product in the U.S. alone. We are also working to bring SYFOVRE to patients worldwide. We recently announced that the European Medicines Agency reset the review of the SYFOVRE application back to day 180 of our initial assessment, which is the last phase of that procedure. This decision follows a judgment made by the Court of Justice in the EU regarding the competing interests of experts. The decision for SYFOVRE is strictly procedural and not related to the SYFOVRE application.

The remainder of our review is expected to be led by the original rapporteurs. We are working closely with the CHMP and EMEA on next steps with the upcoming CHMP opinion anticipated no later than July. Shifting to EMPAVELI. Since its launch in 2021, EMPAVELI has transformed the standard-of-care for patients with PNH. EMPAVELI was the first available treatment proven to effectively control both intravascular and extravascular hemolysis, two hallmarks of PNH, while also significantly improving anemia and protecting the majority of patients from transfusions over the long term. We continue to serve PNH patients who may benefit from EMPAVELI and we believe it has the potential to become a best-in-class treatment option for additional high unmet need areas.

Our biggest near-term opportunity is in C3G and IC-MPGN, two rare and devastating kidney diseases that often start in adolescents. There are currently no approved treatments for these diseases, which often leads to kidney failure or lifelong dialysis. Our Phase 2 NOBLE data showed unprecedented effects on disease activity, including complete clearing of disease activity in 40% of the treated patients at week 12 and reductions by one or more magnitudes of intensity in 80% of treated patients. We plan to share the 52-week data from the NOBLE study at the European Renal Association meeting later this month and we look forward to sharing the top line data from our Phase 3 VALIANT study in mid-2024. Separately, I'm sure many of you saw the recent news out of New York University regarding the first ever combined mechanical heart pump and pig kidney transplant.

This was a historic event and we are thrilled that EMPAVELI played a role in making this xenotransplant surgery a success by helping to protect the kidney from potential rejection. EMPAVELI was also involved in the xenotransplant surgery performed at Mass General Hospital in March by helping to stabilize the transplanted kidney when it showed signs of early rejection. And while the research is early and we have a lot to learn still, we are encouraged by the potential of EMPAVELI in Xenotransplantation. Overall, I am thrilled with the progress we have made so far in 2024. With two commercial products and an emerging pipeline, which we are excited to share more about later this year, we remain steadfast in our vision to develop life changing medicines for people living with some of the most challenging diseases.

And with that, I will now turn it over to Adam to discuss our commercial activities.

Adam Townsend: Thanks, Cedric, and good morning, everyone. I will jump right in with SYFOVRE. As Cedric shared, SYFOVRE sales over the past 12 months have been strong. Initially, our success was largely driven by fast uptake from early adopters. More recently, we've seen both new patient demand and an increasing prescriber base driving sales. While we continue to focus our marketing efforts on retina specialists, we are also educating the referring eye care provider network on the importance of patients with GA getting the treatment they need. Further, we are investing in direct-to-consumer marketing initiatives to increase patient awareness and education about SYFOVRE and GA. Suffice to say that our efforts are paying off. In the first quarter, we distributed 72,000 commercial doses and 5,000 samples.

The first-three months of this year were the three largest volume months since launch through Q1. Growth rates varied monthly with a slight decline in February as compared to January, and then a reacceleration in March, resulting in some of the largest demand weeks to date and our biggest month of the quarter. Additionally, in Q1, we continue to see a double-digit number of new sites come on board each week, with over 2,000 sites of care now using SYFOVRE across a broad range of practice types. We are thrilled by the continued growth we have seen in the second quarter so far across both new and existing patients. It has been an incredible launch and now that we are in its second year, we will be going back to sharing key metrics with you as of quarter end.

Regarding vasculitis, the rate remains rare at approximately one in 10,000 injections. What we have learned is that this appears to be a first injection phenomenon with the rate following a first injection estimated at about one in 4,000. Given the extensive real world experience with SYFOVRE to date, retina specialists are more confident that these rates are rare and stable. And we are seeing many physicians who had either paused or decreased their use now start to use SYFOVRE again or use it in more of their patients. Shifting gears to longer term dynamics, SYFOVRE remains the number one chosen treatment for GA with approximately 85% of the treated market. We are confident that it will remain the market leader due to its strong efficacy, well-documented safety profile, flexible dosing, and the robustness of our overall dataset.

Even more, we are only in the early stages of a large and growing market. The estimated prevalence of GA patients is up to $1.5 million in the United States. Today, based on a recent claims analysis, patients treated are estimated to make up 12% of the market as defined only by those patients who have been diagnosed and are managed by an ECP. However, many GA patients are not yet diagnosed or have not been referred to a specialist. In fact, only a small portion of newly diagnosed patients currently being treated with SYFOVRE are referrals. This means there continues to be a huge opportunity for SYFOVRE as the vast majority of GA patients have not yet been treated. Now that we are in year two, we are executing the next stage of our commercial strategy.

Remember, we are launching a transformative medicine for a disease that has never had a treatment available. So we have learned a lot about what drives both physicians and patients. Let me start with physicians. We plan to further increase our reach within existing physician targets as well as expand our use amongst those who have not used SYFOVRE yet. We are refining our messaging as we better understand what is resonating. At launch, our messaging initially focused on efficacy and then shifted to safety last summer. Now we have pivoted back to leading with efficacy, highlighting the positive results from our three-year GALE extension study in addition to our OAKS and DERBY data and the multiple post-hoc analyses that demonstrate functional benefits following SYFOVRE treatment.

We are also broadening our reach to provide disease state education to other referring eye care providers who see tens of thousands of GA patients. As the market leader, we are educating those doctors on the importance of GA treatment and that patients see a specialist who can then decide the right treatment approach. Moving to patients. Another key learning over the past year is how motivated and actively engaged patients are in their treatment decisions. As you may have seen in our unbranded DTC campaign, our initial message was focused on increasing awareness of GA and encouraging patients to see their eye care professional. These efforts have netted very positive results, including thousands of new GA diagnoses and a significant number of patients starting SYFOVRE treatment.

We recently launched a branded DTC campaign with the focus now on encouraging patients to talk to their physicians about GA treatment with SYFOVRE. Our goal for this campaign is to increase awareness, access many more patients, and accelerate the speed to diagnosis and treatment of GA. Now let me shift to EMPAVELI for PNH. Revenues in the quarter were $26 million. Compliance rates remain incredibly high at 97% and the product also continues to have a compelling safety profile. With over 1,600 patients years of systemic pegcetacoplan exposure, there have still been zero cases of meningococcal infection and very low rates of thrombosis. But obviously, we are now seeing heightened competition. With a new entrant in the market, we anticipate pressure on EMPAVELI sales, at least for the next six months to 12 months.

Although we have a strong foothold, I want to be realistic that demand is expected to be flat in the medium term. We still expect to see new patients starting on treatment, but we also expect to see some patients switching to an oral. The EMPAVELI team is laser-focused on emphasizing the real world profile of EMPAVELI with physicians, including its three year efficacy data and strong safety profile. We have confidence that this profile will drive some physicians and patients to return to EMPAVELI over time. While still very early, we've already seen a few instances of this. Finally, we are particularly excited about the opportunity to potentially expand EMPAVELI into C3G and primary IC-MPGN. These are two devastating diseases with tremendous unmet need and a patient population that is 3 times bigger than PNH.

If approved, we will be able to leverage much of our existing infrastructure, such as utilization of our field based teams to reach nephrologists and deliver EMPAVELI to patients and physicians. Caroline will give more detail on the opportunity we have for these diseases. Caroline?

Caroline Baumal: Thanks, Adam, and good morning, everyone. Yes, we are really looking forward to the top-line data from our Phase 3 VALIANT study in C3G and IC-MPGN, which we expect mid-2024. I'm going to focus my remarks today on this upcoming development milestone, providing some background on the patient population as well as on the study. C3G and IC-MPGN are debilitating kidney diseases caused by uncontrolled complement activation and breakdown of C3. Symptoms include protein and blood in the urine, swelling, fatigue, and high blood pressure. These diseases are estimated to affect 5,000 people in the United States and up to 8,000 in Europe, with the first diagnosis typically occurring in adolescence. Within five to 10 years of diagnosis, approximately 50% of people living with C3G and IC-MPGN ultimately suffer from kidney failure, resulting in either a kidney transplant or lifelong dialysis, both of which are highly burdensome and life-threatening to the patient.

However, neither are curative and there are no approved therapies for these diseases. The incidence of disease recurrence is high and up to 50% of patients lose their kidney transplants due to the disease recurrence. Some patients may have multiple transplants in their lifetime, depending on their age at the first diagnosis. The VALIANT study enrolled 124 patients with either C3G or primary IC-MPGN in a randomized, placebo-controlled double-blinded multicenter study designed to evaluate Pegcetacoplan efficacy and safety. It is the only Phase 3 study to include a broad population inclusive of adolescent and adult patients with native and post-transplant forms of both diseases. Study participants were randomized one-to-one to receive Pegcetacoplan or placebo twice weekly for 26 weeks.

Following this 26-week period, patients moved to a 26-week open-label phase in which all patients received Pegcetacoplan. The primary endpoint is a log-transformed ratio of urine protein to creatinine ratio or uPCR, a key marker of disease progression in all patients at week 26 compared to baseline. Physicians consider a statistically significant response to the primary endpoint as clinically meaningful in this disease. Key secondary endpoints include additional measures on both uPCR and on eGFR. We are very excited about the potential opportunity that Pegcetacoplan may have on patients with C3G and IC-MPGN. Turning to SYFOVRE briefly, we participated in several global medical meetings over the past few months. The retina community has been highly engaged with the Apellis team, especially regarding our latest data from the GALE study, which demonstrated up to 42% slowing of GA growth in year three in non- subfoveal patients compared to projected CHMP.

These increasing effects had never been shown before in any GA study. Finally, before I hand it over to Tim, I want to extend a warm welcome to Dr. Phil Ferrone, who joins us as our Chief Medical Retina Advisor. I have known Phil for a long time, having worked on multiple clinical trials and other programs together throughout our careers. Phil is a leading figure within the medical community with deep expertise in patient care and retina research. He is also a past President of the ASRS and has been on its Board for 18 years. Given Phil's in-depth experience with SYFOVRE and overall retina experience, he is uniquely positioned to help us continue to bring SYFOVRE to GA patients and develop our retina pipeline. I know I speak for all of us at Apellis when I say we are thrilled to have him on board.

Now I will turn the call over to Tim for a review of the financials. Tim?

Tim Sullivan: Thank you, Caroline. I will provide a brief overview of our financials, and you can find additional details in the press release that we issued earlier this morning. Total revenue for the first quarter 2024 was $172.3 million, including $137.5 million in SYFOVRE and $25.6 million in EMPAVELI US net product revenue. This compares with $44.8 million in total revenue in the first quarter of 2023. Turning to the rest of the P&L. Fr the first quarter, cost-of-sales was $20.2 million. R&D expenses were $84.7 million. The reason R&D expenses are slightly higher in Q1 versus Q4 is because there was a $15 million one-time non-cash expense in Q1 related to the discontinuation of CAD. SG&A expenses were $129.5 million and we reported a net loss of $66.4 million.

While R&D and SG&A may fluctuate on a quarterly basis, we continue to expect our total operating expenses for the full year 2024 to be less than our total expenses in 2023. Turning to our balance sheet. As of March 31, 2024, we had $326 million in cash and cash equivalents. As Cedric mentioned, we are in a strong position financially. With our existing cash combined with projected revenues, we continue to believe that we have sufficient cash to fund our operations for the foreseeable future. I will now hand the call back over to Cedric for closing remarks. Cedric?

Cedric Francois: Thanks, Tim. We are highly encouraged by the start of 2024 and excited for the value-driving milestones on the horizon. I want to emphasize our determination to be the leader in complement medicine. The progress across our pipeline exemplified by, but not limited to SYFOVRE and EMPAVELI is presenting us with opportunities to create meaningful therapies and substantial value for shareholders. We appreciate your continued support. We truly believe that the best is yet to come. Let us now open the call for questions. Operator?

See also

20 States with the Highest Fertility Rates in the US and

11 Best Delivery Stocks to Buy According to Hedge Funds.

To continue reading the Q&A session, please click here.